[Aramike]

Or when you see a spike in wage inflation. Wage inflation always precedes CPI inflation.

Agreed. But I think that becomes a chicken/egg scenario, ultimately.

This is the natural progression of an economy and a country as it becomes more affluent and educated. As people gain wealth, they have the discretionary income to spend on services - housecleaning, lawnmowing, accountants, plumbers, etc - that you would not otherwise have the money to spend on if you were just scraping by. More wealth = more demand for services = more services.

You're exactly right. But try to understand my point - I cannot name a single national economy which has ever survived this evolution long term.

Can you?

Think about it: now those providing services are enriched, requiring more service. And so on. Ultimately your economy is based upon service and production is impacted. And now you have nothing with which to trade for commodities.

And as for manufacturing, the real value is in the front and back ends of the product design. Think about it - you're designing ipods. Your engineers come up with the design and function of the device. You send the schematics to China for manufacture. The products are made and shipped over here for sale. Your sales force sells them, as well as the accessories for the ipod. Your service technicians fix them when they break. Where's the value here? Who is contributing most to an economy? Is it the design engineers earning $150,000 a year? Or is it the Chinese assembly line worker earing $1.50 a day? Is it the $1.50 a day assembly line worker or is it the service tech earning $75,000 a year? Who's going to contribute more to an economy through consumption? The higher paid worker or the lower paid one? Is specialized knowledge more valuable than manual labor? Of course it is.

I must give credit where it's due, and I agree completely. In fact, I base my entire understanding upon economic theory on the very principle of impact value.